New American Legislation Helps Small Businesses Find Funding

In an effort to create jobs, new measures are being approved by Congress. Digital strategies borne from crowd funding and social networks are now influencing our legislative solutions in DC.

The US Senate has recently given small businesses more ways to find investors with less hurdles. The JOBS Act and its amendment, the freshly-approved CROWDFUND Act, give startups and other new companies the option to employ group funding tactics to their funding strategies. The public is already familiar with this type of funding due to the popularity of Kickstarter, IndieGogo and others, where a project or artwork receives donations through the third-party website. Now companies can receive money from the general public through a broker or portal, with stakeholder compensation. This is a key difference between the previous crowdfunding project process, which encourages giving and in return participants receive various types of gifts if the campaign is a success. The process that is now encouraged by the JOBS Act does not collect donations, but investments.

Creating jobs through small business support and financing solutions

The specifics of the JOBS Act loosen SEC regulations in order to permit easier access to capital, all in an effort to create more jobs. "There is a direct correlation between job growth and small-business owners' ability to garner financing," stated NSBA President and CEO Todd McCracken. The Senate gave the legislation bipartisan support, which includes additional provisions to the crowdfunding exemption that allows small companies to raise up to $1 million in a 12-month period and preempt state blue sky laws, including “language allowing for general solicitation or general advertising to find accredited investors.”

Startups and all small businesses can benefit from the JOBS Act

By name, the Jumpstart our Business Startups Act slants itself towards digital financing with the support of group funding. But the Act potentially affects startups and all small businesses because of its far-reaching effects. Not only does it increase opportunities for equity investment as on sites like SeedVo, it eases public disclosures rules and makes it simpler to go public. Private companies who must file an IPO now if they have over 2,000 shareholders, not 500. Businesses with less than $1 billion in revenue are now referred to as “emerging growth companies” and are exempt from some Dodd-Frank rules.

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May 2013

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